Trio Of Economic Reports Show Uneven Recovery

July 2, 1993|By Brad Kuhn of The Sentinel Staff

There was a little something for everyone in Thursday's economic news.

Doomsayers could find evidence of another downturn in the National Association of Purchasing Manager's worse-than-expected report that the manufacturing sector contracted in June. Optimists could find solace in declining first-time claims for unemployment benefits and a 0.5 percent increase in construction spending.

''I guess it shows that not every sector is in decline,'' said Christopher Low, chief economist with HSBC Holdings Inc. in New York. ''But on the whole I'd say the news was generally negative . . . Especially when you consider that a tax increase is about to hit the economy. Growth is fragile and tentative and that tax increase could be enough to turn it around and send things in the other direction.''

The rise in construction spending reported by the Commerce Department was not enough to offset a 0.7 percent fall reported in April. And the 11,000 drop in weekly unemployment claims to 340,000 was not enough to resume a downward trend established earlier in the year.

Low said the decline of the manufacturing sector is especially troubling to him because jobs in that sector pay the highest salaries.

The National Association of Purchasing Management - whose monthly report is watched closely by economists as a barometer of the larger economy - said its index fell to 48.3 percent last month from 51.1 percent in May. A reading above 50 percent indicates the manufacturing economy is expanding while one below 50 percent means it is shrinking.

The June level was the lowest since 47.3 in December 1991 and the latest evidence suggesting the economy is stumbling. Economists had expected a reading of 50.3 percent.

Economists said uncertainty over taxes in President Clinton's budget and health-care reform is partly to blame. They said businesses have put spending and hiring plans on hold until details are ironed out.

But they said they expect the current slowdown will prove fleeting, like others that have surfaced since the economic recovery took hold in March 1991.

Economists have scaled back their forecasts of second-quarter growth, though many expect that low interest rates will help the economy perk up later this year.

''It's growing, but it's growing at a very, very slow pace,'' said Darwin Beck of First Boston Corp.